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And why not? While the four Republican Senators who sent Bernanke a letter urging him to stop buying bonds were certainly wrong to step on the toes of an independent head of the Federal Reserve, it's hard to see how pouring more money into an already bloated system will help--after all, it's not expensive financing that's keeping companies and consumers from spending money. It's lack of demand from people who are grappling with stagnating wages, high unemployment, downward mobility and a bifurcated labor market. (For more on this, see our exclusive excerpt from liberal economist Jeffrey D. Sachs' new book The Price of Civilization.)
While Operation Twist may become another fruitless policy maneuver, it tells us something very important about where we are now. We can no longer paper over the underlying shifts in our economy with easy monetary or fiscal fixes. That's because globalization has reached a critical mass that is simply impossible to ignore. American companies in sectors exposed to global competition over the past 30 years haven't created any new net jobs at home. That fact, published in a recent paper by Nobel laureate Michael Spence, is only the most startling representation of the changes around us. There are many others in the headlines every day, from the flameouts of clean-energy companies like Solyndra that can't compete with Chinese rivals to the pronouncements by executives like Coca-Cola CEO Muhtar Kent that China is a more hospitable place than America to do business.
Of course, it's easy to overstate or oversimplify the rise of Brazil or India. Emerging markets have their problems. For starters, their governmental systems and civil societies still have a long way to go. (It would be interesting to see how far Kent would get pursuing, say, an intellectual-property case in a Chinese court.) And their continued rise is far from guaranteed. The explosive growth they experienced in the four years preceding the financial crisis was double their historic norm. Now, as the BRIC countries (Brazil, Russia, India and China) grapple with richer populations, higher wages and demands for more democracy, they too are under pressure. Far from stepping up and taking more political and economic leadership, emerging markets are trying to manage rising inflation, higher unemployment and social unrest. In poor countries, as in rich ones, it's increasingly every man for himself. China is too busy dealing with its real-estate-driven debt bubble to help bail out the euro. Brazilian President Dilma Rousseff recently declared that in the midst of economic crisis, "our principal weapon is to expand and defend our internal market."